I’ll try to explain how mine is set up. I use Tortoise switch machines and am really not familiar with the DZ stuff. You need a wire on all 4 black rails surrounding the diamond. Look at how a car or engine passes through it. 2 opposite rails contact the wheels and the other 2 will contact the pickup rollers. You need 2 relays. The opposite rails wires get tied together at the relays common. The other contacts will provide either center rail power or outside rail power after you throw your toggle switch or push your buttons.
Looking at your demo. I can’t see the underside of the x over track. I only see one wire going to the relay. It’s probably set as a outside rail and that explains the arching. Not sure if the other route is even wired. I see no arching. Just the lights going out over a dead spot where there aren’t enough powered rails to keep it alive.
